Kim puts North Korean army on war footing as rhetoric escalates

Kim puts North Korean army on war footing as rhetoric escalates

SEOUL — North Korean leader Kim Jong Un ordered his army to prepare for war after an exchange of fire with South Korea yesterday (Aug 20), ratcheting up the rhetoric as the latest skirmish between the two nations intensifies.

Mr Kim declared a “semi-state of war” along the border and ordered his troops to be combat ready from 5 pm local time, North Korea’s official Korean Central News Agency said today. Yesterday, Mr Kim gave South Korea 48 hours to stop broadcasting propaganda across the demilitarised zone or face further attacks. Stocks fell the most since 2012.

The incident is one of the most serious since Mr Kim Jong Un became supreme leader 3 1/2 years ago and began consolidating power through a series of purges and provocations against the South. The uneasy truce between the two Koreas has been periodically disrupted by exchanges of fire that peter out before they turn into anything more serious. Still, Pyongyang’s unpredictable nature keeps tensions high.

“It’s a war of rhetoric from now on,” Lee Ji-sue, a professor of North Korean studies at Seoul’s Myongji University, said by phone. “North Korea has almost never retaliated back and will raise tensions until it feels it’s consolidated its internal controls enough.”

The threat came after the North fired shells into South Korean territory, prompting the South to respond with a barrage of artillery. The North denied firing on the South yesterday. South Korea put its military on high alert and President Park Geun-hye canceled her public engagements to focus on the crisis.

Defence Stocks

The benchmark Kospi index fell as much as 3 per cent and was recently down 1.6 per cent at 1883.35, in line with other Asian markets. Romanson Co. and Shinwon Corp., which all do business in the Gaeseong industrial complex jointly run by the two Koreas, fell as much as 8.2 per cent and 9.5 per cent before recovering losses. Among defense-related stocks, Speco Co., a maker of products such as water jets, rose 20 per cent while electronics warfare equipment maker Victek jumped 22 per cent.

South Korea is monitoring markets and is prepared to take action to offset any turmoil caused by the North Korean situation, Vice Finance Minister Joo Hyung Hwan told reporters Friday. Policy makers are also watching for risks stemming from U.S. monetary policy and China’s slowdown, he said.

The Bank of Korea held a meeting to discuss the impact of North Korea’s actions, Park Sung-joon, a press official, said by phone.
Tensions have flared in recent weeks across the so-called DMZ that bisects the Korean peninsula, more than 60 years after Korean War ended in a stalemate. Two South Korean soldiers were maimed Aug 4 by land mines that the government in Seoul says were recently laid by North Korea. North Korea denied setting the devices.

South Korea retaliated for the mine incident by resuming propaganda broadcasts through loudspeakers in the DMZ for the first time since 2004. Relations deteriorated further when North Korea threatened “indiscriminate attacks” over the broadcasts and slammed the US and South Korea for starting joint annual military drills that the North call a rehearsal for invasion.

“North Korea is likely to follow through on its threats to continue military retaliation if South Korea does not cease loudspeaker broadcasts by the end of this week,” Victor Cha, a senior adviser for risk consultancy Teneo Intelligence in New York, said in an e-mail. “These actions correlate with the pattern of inter-Korean relations prior to the start of the military exercises, which had been trending negatively following the land mine blast.”

State of War

North Korea previously declared “a state of war” during U.S.-South Korean drills in 2013, a month after conducting its third nuclear test. In 2010 North Korea shelled a front-line South Korean island, killing two marines and two civilians. Last year, their ships exchanged warning fire near a disputed Yellow Sea boundary.

Previous crises have prompted bilateral talks that helped ratchet down tensions. No high-level talks have taken place between the two Koreas since February last year.

Mr Kim Jong Un has also refused to bow to international pressure to drop his nuclear ambitions before aid talks can resume and continues to develop nuclear capabilities along with ballistic missiles.

North Korea moved its clock back by half an hour earlier this month to mark the anniversary of liberation from Japanese colonial rule. That means Kim’s order for his army to be ready for war at 5 pm takes effect at 5:30 p.m. in Seoul. BLOOMBERG